<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------ -------------------------
Commission File Number 1-13006
-------------------------------------------------------
Park National Corporation
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(Exact name of registrant as specified in its charter)
Ohio 31-1179518
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 North Third Street, Newark, Ohio 43055
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(Address of principal executive offices) Zip Code
(614) 349-8451
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ---------
9,419,274 common shares, no par value per share, outstanding at July 31, 1997.
Page 1 of 54
Exhibit Index At Page 20
<PAGE> 2
PARK NATIONAL CORPORATION
CONTENTS
--------
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION 3-8
Item 1. Financial Statements 3-8
Consolidated Balance Sheet as of June 30, 1997
and December 31, 1996 (unaudited) 3
Consolidated Condensed Statement of Income for the Three
Months Ended and for the Six Months Ended June 30, 1997 and
1996 (unaudited) 4-5
Consolidated Statement of Cash Flows for the Six Months
ended June 30, 1997 and 1996 (unaudited) 6-7
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11-17
PART II. OTHER INFORMATION 18
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBITS 20-54
</TABLE>
-2-
<PAGE> 3
PARK NATIONAL CORPORATION
Consolidated Balance Sheet (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
<S> <C> <C>
Assets:
Cash and due from banks $ 80,924 $ 81,765
Federal funds sold 600 0
Securities available-for-sale, at fair
value (amortized cost of $576,076
and $556,436 at June 30, 1997
and December 31, 1996) 582,423 563,613
Securities held-to-maturity, at amortized
cost (fair value approximates $9,462
and $11,217 at June 30, 1997
and December 31, 1996) 9,243 10,780
Loans (net of unearned interest) 1,534,410 1,472,024
Allowance for possible loan losses 34,325 32,347
Net loans 1,500,085 1,439,677
Bank premises and equipment, net 27,321 27,548
Other assets 65,857 61,587
----------- -----------
Total assets $ 2,266,453 $ 2,184,970
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing $ 242,812 $ 225,424
Interest-bearing 1,534,985 1,537,994
Total deposits 1,777,797 1,763,418
Short-term borrowings 218,356 135,111
Long term debt 41,346 62,375
Other liabilities 18,381 25,105
Total liabilities 2,055,880 1,986,009
Stockholders' Equity:
Common stock (No par value; 20,000,000
shares authorized; 9,547,610 shares
in 1997 and 9,443,864 shares
issued in 1996) 68,063 64,612
Unrealized holding gain on
available-for-sale securities, net 4,146 4,687
Retained earnings 143,665 132,647
Treasury stock (129,897 shares in 1997
and 89,426 shares in 1996) (5,301) (2,985)
Total stockholders' equity 210,573 198,961
----------- -----------
Total liabilities and
stockholders' equity $ 2,266,453 $ 2,184,970
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
PARK NATIONAL CORPORATION
Consolidated Condensed Statement of Income (Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest Income:
Interest & fees on loans $35,515 $31,676 $69,645 $63,426
Interest on:
Obligations of U.S. Govt.
its agencies & other
securities 8,811 6,695 17,184 13,216
Obligations of states &
political subdivisions 938 882 1,808 1,724
Other interest income 142 554 426 1,101
Total interest income 45,406 39,807 89,063 79,467
Interest expense:
Interest on deposits:
Demand & savings deposits 4,269 3,929 8,362 7,900
Time deposits 12,300 10,996 24,537 21,962
Non-deposit interest 2,897 1,705 5,344 3,701
Total interest expense 19,466 16,630 38,243 33,563
Net interest income 25,940 23,177 50,820 45,904
Provision for loan losses 1,454 1,256 2,648 2,342
Net interest income
after provision 24,486 21,921 48,172 43,562
</TABLE>
4
<PAGE> 5
PARK NATIONAL CORPORATION
Consolidated Condensed Statement of Income (Unaudited) - (Continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Other income $ 4,829 $ 4,238 $ 9,771 $ 8,656
Loss on sale of securities 0 (401) 0 (700)
Other expense:
Salaries & employee benefits 7,734 6,769 15,387 14,054
Occupancy 821 757 1,652 1,565
Furniture & equipment 890 909 1,789 1,801
Other expenses 6,021 5,149 12,250 10,994
Total other expense 15,466 13,584 31,078 28,414
Income before federal
income taxes 13,849 12,174 26,865 23,104
Federal income taxes 4,297 3,751 8,324 7,092
Net income $ 9,552 $ 8,423 $ 18,541 $ 16,012
=========== =========== =========== ===========
Per Share:
Net income per share:
Primary $ 1.01 $ 0.90 $ 1.97 $ 1.71
Fully diluted $ 1.01 $ 0.90 $ 1.97 $ 1.71
Weighted average common
shares outstanding:
Primary 9,419,553 9,385,147 9,402,216 9,381,644
Fully Diluted 9,430,958 9,385,933 9,408,196 9,382,760
Cash dividends declared $ 0.40 $ 0.35 $ 0.80 $ 0.70
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 6
PARK NATIONAL CORPORATION
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 18,541 $ 16,012
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, amortization & accretion 217 591
Provision for loan losses 2,648 2,342
Amortization of the excess of cost over
net assets of banks purchased 978 257
Realized investment security losses 0 700
Changes in assets & liabilities:
Increase in other assets (4,959) (2,450)
Decrease in other liabilities (2,969) (2,146)
Net cash provided from operating
activities 14,456 15,306
Investing activities:
Proceeds from sales of:
Available-for-sale securities 24,925 37,636
Proceeds fro maturities of:
Available-for-sale securities 85,873 64,062
Held-to-maturity securities 1,888 826
Purchases of:
Available-for-sale securities (129,974) (112,835)
Held-to-maturity securities 0 (1,575)
Net increase in loans (62,502) (16,760)
Purchases of premises & equipment, net (1,358) (1,007)
Net cash used by investing activities (81,148) (29,653)
</TABLE>
6
<PAGE> 7
PARK NATIONAL CORPORATION
Consolidated Statement of Cash Flows (Unaudited) - (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
--------- ---------
<S> <C> <C>
Financing activities:
Net increase in deposits $ 14,379 $ 19,370
Net increase/(decrease) in
short-term borrowings 83,245 (12,623)
Exercise of stock options 3,451 85
(Purchase)/reissue of treasury stock (2,317) 389
Repayment of long term debt (21,029) (507)
Cash dividends paid (11,278) (8,533)
Net cash provided from/(used by)
financing activities 66,451 (1,819)
Decrease in cash & cash equivalents (241) (16,166)
Cash & cash equivalents at beginning of year 81,765 113,164
Cash & cash equivalents
at end of period $ 81,524 $ 96,998
========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 39,729 $ 34,015
Income taxes 7,455 8,350
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
PARK NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Month Periods Ended June 30, 1997 and 1996.
Note 1 - Basis of Presentation
---------------------
The consolidated financial statements included in this report have been prepared
by Park National Corporation (the "Registrant", "Corporation", or "Park")
without audit. In the opinion of management, all adjustments (consisting solely
of normal recurring accruals) necessary for a fair presentation of results of
operations for the interim periods included herein have been made. The results
of operations for the periods ended June 30, 1997 are not necessarily indicative
of the operating results to be anticipated for the fiscal year ended December
31, 1997.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions for Form 10-Q, and therefore, do not include
all information and footnotes necessary for a fair presentation of the balance
sheet, condensed statement of income and statement of cash flows in conformity
with generally accepted accounting principles. These financial statements should
be read in conjunction with the financial statements included in the Annual
Report for the year ended December 31, 1996. Certain amounts in prior periods
have been reclassified to conform to the financial statement presentation used
for current periods.
Primary earnings per share is computed based on the weighted average shares
outstanding during the periods presented plus common equivalent shares arising
from dilutive stock options, using the treasury stock method. Fully diluted
earnings per share reflects additional dilution related to stock options due to
the use of market price at the end of the period when higher than the average
price for the period.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings per Share, which is required to be adopted on December 31, 1997. At
that time, the Corporation will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements, primary earnings per share will be replaced by a more simply
calculated basic earnings per share which will not include the impact of any
potentially dilutive securities. Diluted earnings per share will continue to be
disclosed and will be calculated using a methodology not significantly different
from that presently used to calculate fully diluted earnings per share. The new
calculation methods will not have a material impact on the earnings per share
results as the Corporation has not had significant dilution from stock options.
Park does not have any off-balance sheet derivative financial instruments such
as interest-rate swap agreements.
Note 2 - Acquisition
-----------
On May 5, 1997, Park merged with First-Knox Banc Corp. ("First-Knox"), a $569
million bank holding company headquartered in Mount Vernon, Ohio, in a
transaction accounted for as a pooling-of-interests. Park issued approximately
2.3 million shares of common stock to the stockholders of First-Knox based upon
an exchange ratio of .5914 shares of Park common stock for each outstanding
share of First-Knox common stock. The historical financial statements of Park
have been restated to show Park and First-Knox on a combined basis.
-8-
<PAGE> 9
Separate results of operations for Park and First-Knox follow:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, 1996 Ended June 30, 1996
------------------- -------------- ----
<S> <C> <C>
Net Interest Income
Park $17,829 $35,413
First-Knox 5,348 10,491
------- -------
Combined $23,177 $45,904
Net Income
Park $ 6,804 $12,899
First-Knox 1,619 3,113
------- -------
Combined $ 8,423 $16,012
Net Income Per Common Share
Park $ .96 $ 1.81
First-Knox .43 .82
Combined $ .90 $ 1.71
</TABLE>
Certain amounts in prior periods in 1996 have been reclassified to conform to
the financial statement presentation used for current periods.
Note 3 - Allowance for Possible Loan Losses
----------------------------------
The allowance for possible loan losses is that amount believed adequate to
absorb estimated credit losses in the loan portfolio based on management's
evaluation of various factors including overall growth in the loan portfolio, an
analysis of individual loans, prior and current loss experience, and current and
anticipated economic conditions. A provision for loan losses is charged to
operations based on management's periodic evaluation of these and other
pertinent factors.
<TABLE>
<CAPTION>
(In Thousands)
1997 1996
-------- --------
<S> <C> <C>
Balance January 1 $ 32,347 $ 29,239
Provision for loan losses 2,648 2,342
Losses charged to the reserve (2,102) (2,037)
Recoveries 1,432 1,314
-------- --------
Balance June 30, 1997 $ 34,325 $ 30,858
======== ========
</TABLE>
-9-
<PAGE> 10
Note 4 - Long-Term Debt
--------------
<TABLE>
<CAPTION>
Description (In Thousands)
--------------- June 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Fixed rate Federal Home Loan Bank advances
with monthly principal and interest payments:
5.60% Advance due August 1, 2003 $ 2,043 $ 2,180
6.35% Advance due August 1, 2013 $ 2,676 $ 2,723
5.95% Advance due March 1, 2004 $ 553 $ 586
5.70% Advance due May 1, 2004 $ 4,499 $ 4,760
5.85% Advance due January 1, 2016 $ 4,325 $ 4,876
Fixed rate Federal Home Loan Bank advances
with monthly interest payments:
5.35% Advance due February 1, 1999 $ 5,000 $ 5,000
5.60% Advance due April 1, 1999 $ 5,000 $ 5,000
5.70% Advance due June 1, 1999 $ 7,000 $ 7,000
6.35% Advance due March 1, 2004 $ 250 $ 250
6.15% Advance due July 21, 1997 $10,000 $ 10,000
6.60% Advance due July 21, 1999 $ -0- $ 10,000
6.90% Advance due July 21, 2001 $ -0- $ 10,000
-------- --------
$ 41,346 $ 62,375
======== ========
</TABLE>
Federal Home Loan Bank (FHLB) advances are collateralized by the FHLB stock
owned by Park's affiliate banks and by residential mortgage loans pledged under
a blanket agreement by Park's affiliate banks.
-10-
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of Results of Operations for the Three and Six Month Periods Ended
June 30, 1997 and 1996
Net Interest Income
- -------------------
The Corporation's principal source of earnings is net interest income, the
difference between total interest income and total interest expense. Net
interest income increased by $2.8 million or 11.9% to $25.94 million for the
three months ended June 30, 1997 compared to $23.18 million for the second
quarter of 1996. The following table compares the average balance and tax
equivalent yield/cost for interest-earning assets and interest-bearing
liabilities for the second quarter of 1997 with the same quarter in 1996.
<TABLE>
<CAPTION>
Three Months Ended June 30th
(In Thousands)
1997 1996
Tax Tax
Average Equivalent Average Equivalent
Balance % Balance %
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Loans $1,511,498 9.46% $1,350,470 9.47%
Taxable Investments $ 503,649 7.02% $ 399,510 6.74%
Tax-Exempt Investments $ 67,197 8.46% $ 62,639 8.56%
Federal Funds Sold $ 10,878 5.24% $ 41,789 5.33%
---------- ---- ---------- ----
Interest-Earning Assets $2,093,222 8.83% $1,854,408 8.77%
---------- ---- ---------- ----
Interest-Bearing Deposits $1,554,898 4.27% $1,413,519 4.25%
Short-Term Borrowings $ 158,801 4.90% $ 111,614 4.42%
Long-Term Borrowings $ 63,264 6.06% $ 35,009 5.49%
---------- ---- ---------- ----
Interest-Bearing Liabilities $1,776,963 4.39% $1,560,142 4.29%
---------- ---- ---------- ----
Excess Interest-Earning Assets $ 316,259 4.44% $ 294,266 4.48%
Net Interest Margin 5.09% 5.16%
</TABLE>
-11-
<PAGE> 12
Average interest-earning assets increased by $239 million or 12.9% to $2,093
million for the quarter ended June 30, 1997 compared to the same quarter in
1996. Average loans outstanding increased by $161 million or 11.9% to $1,511
million for the second quarter of 1997 compared to the same quarter in 1996.
Approximately $31 million of this increase was due to loans acquired as part of
the purchase of branches in Richland County in December, 1996. Loan demand
continues to be relatively strong. Average investment securities including
federal funds sold increased by $78 million or 15.4% to $582 million in 1997
compared to the same quarter in 1996. The yield on taxable investments increased
to 7.02% for the second quarter of 1997 compared to 6.74% for the same quarter
in 1996. The increase in yield on taxable investments resulted primarily from
the purchase of longer-term mortgage-backed securities and callable U.S. Agency
securities acquired during the third quarter of 1996.
Average interest-bearing liabilities increased by $217 million or 13.9% to
$1,777 million for the quarter ended June 30, 1997 compared to the same quarter
in 1996. Average interest-bearing deposits increased by $141 million or 10.0% to
$1,555 million for the second quarter of 1997 compared to the same quarter in
1996. Approximately $98 million of this increase was due to deposits acquired as
part of the purchase of branches in Richland County in December, 1996. Average
total borrowings increased by $75 million or 52% to $222 million for the second
quarter of 1997 compared to the same quarter in 1996. The increase in average
borrowings was primarily used to fund the purchase of longer-term investment
securities.
The increase in net interest income of $2.8 million or 11.9% to $25.94 million
for the three months ended June 30, 1997 was primarily due to the 12.9% increase
in average interest-earning assets. The tax equivalent net interest margin
(defined as net interest income divided by average earning assets) decreased to
5.09% for the second quarter of 1997 compared to 5.16% for the same quarter in
1996. For the three months ended June 30, 1997, the net interest spread (the
difference between the yield on interest-earning assets and the cost of
interest-bearing liabilities) decreased by .04% to 4.44% compared to 4.48% for
the same period in 1996. The yield on interest-earning assets increased by .06%
to 8.83% for the second quarter of 1997 compared to 8.77% for the same quarter
in 1996 and the cost of interest-bearing liabilities increased by .10% to 4.39%
for the second quarter of 1997 compared to 4.29% for the same period in 1996.
Net interest income increased by $4.9 million or 10.7% to $50.8 million for the
six months ended June 30, 1997 compared to $45.9 million for the same period in
1996. The following table compares the average balance and tax equivalent
yield/cost for interest-earning assets and interest-bearing liabilities for the
first six months of 1997 with the same period in 1996.
<TABLE>
<CAPTION>
Six Months Ended June 30th
(In Thousands)
1997 1996
---------------------- ----------------------
Tax Tax
Average Equivalent Average Equivalent
Balance % Balance %
-------------------- ----------------------
<S> <C> <C> <C> <C>
Loans $1,495,690 9.43% $1,347,995 9.50%
Taxable $ 498,382 6.95% $ 398,087 6.68%
Investments
Tax-Exempt
Investments $ 63,806 8.63% $ 61,140 8.57%
</TABLE>
-12-
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Federal Funds $ 16,102 5.33% $ 41,434 5.34%
Sold ---------- ---- ---------- ----
Interest-Earning $2,073,980 8.79% $1,848,656 8.80%
Assets ---------- ---- ---------- ----
Interest-Bearing $1,551,010 4.28% $1,399,173 4.29%
Deposits
Short-Term $ 147,517 4.68% $ 119,749 4.60%
Borrowings
Long-Term $ 61,494 6.29% $ 35,132 5.51%
Borrowings ---------- ---- ---------- ----
Interest-Bearing $1,760,021 4.38% $1,554,054 4.34%
Liabilities ---------- ---- ---------- ----
Excess Interest- $ 313,959 4.41% $ 294,602 4.46%
Earning Assets
Net Interest Margin 5.07% 5.14%
</TABLE>
Average interest-earning assets increased by $225 million or 12.2% to $2,074
million for the six months ended June 30, 1997 compared to the same period in
1996. Average loans outstanding increased by $148 million or 11.0% to $1,496
million for the first half of 1997 compared to the same period in 1996.
Approximately $31 million of this increase was due to loans acquired as part of
the purchase of branches in Richland County in December, 1996. Loan demand
continues to be relatively strong, particularly for consumer loans secured by
automobiles. Average investment securities including federal funds sold
increased by $78 million or 15.5% to $578 million for the first six months of
1997 compared to the same period in 1996. The yield on taxable investments
increased to 6.95% for the first half of 1997 compared to 6.68% for the same
period in 1996. The increase in yield on taxable investments resulted primarily
from the purchase of longer-term mortgage-backed securities and callable U.S.
Agency securities acquired during the third quarter of 1996.
Average interest-bearing liabilities increased by $206 million or 13.3% to
$1,760 million for the first six months of 1997 compared to the same period in
1996. Average interest-bearing deposits increased by $152 million or 10.9% to
$1,551 million for the first half of 1997 compared to the same period in 1996.
Approximately $98 million of this increase was due to deposits acquired as part
of the purchase of branches in Richland County in December, 1996. Average total
borrowings increased by $54 million or 34.9% to $209 million for the first half
of 1997 compared to the same period in 1996. The increase in average borrowings
was primarily used to fund the purchase of longer-term investment securities.
The increase in net interest income of $4.9 million or 10.7% to $50.8 million
for the first six months of 1997 was primarily due to the 12.2% increase in
average interest-earning assets. The tax equivalent net interest margin (defined
as net interest income divided by average earning assets) decreased to 5.07% for
the first half of 1997 compared to 5.14% for the same period in 1996. For the
six months ended June 30, 1997, the net interest spread (the difference between
the yield on interest-earning assets and the cost of interest-bearing
liabilities) decreased by .05% to 4.41% compared to 4.46% for the same period in
1996. The yield on interest-earning assets decreased by .01% to 8.79% in 1997
compared to 8.80% for 1996 and the cost of interest-bearing liabilities
increased by .04% to 4.38% in 1997 compared to 4.34% in 1996.
-13-
<PAGE> 14
Provision for Loan Losses
- -------------------------
The provision for loan losses increased by $198,000 to $1.45 million for the
three months ended June 30, 1997 and increased by $306,000 to $2.65 million for
the six months ended June 30, 1997 compared to the same periods in 1996. Net
charge-offs were $716,000 and $670,000, respectively, for the three and six
month periods ended June 30, 1997 compared to net charge-offs of $421,000 and
$723,000, respectively, for the same periods in 1996. Non-performing loans,
defined as loans that are 90 days past due, renegotiated loans and non-accrual
loans were $7.1 million or .46% of loans at June 30, 1997 compared to $7.8
million or .53% of loans at December 31, 1996 and $6.9 million or .50% of loans
at June 30, 1996. The reserve for loan losses as a percentage of outstanding
loans was 2.24% at June 30, 1997 compared to 2.20% at December 31, 1996 and
2.25% at June 30, 1996. See Footnote 3 for a discussion of the factors
considered by management in determining the provision for loan losses.
Non-Interest Income
- -------------------
Non-interest income increased by $591,000 or 13.9% to $4.8 million for the three
months ended June 30, 1997 and increased by $1.1 million or 12.9% to $9.8
million for the six months ended June 30, 1997 compared to the same periods in
1996. The increase in non-interest income for both periods in 1997 compared to
1996 was primarily due to increases in fees from fiduciary activities and
service charges on deposit accounts.
Security Losses
- ---------------
Investment security losses were $401,000 for the three month period ended June
30, 1996 and $700,000 for the first half of 1996 compared to no gain or loss for
the same periods in 1997. In 1996, taxable investment securities were sold and
the proceeds reinvested into taxable investment securities with slightly longer
maturities.
At June 30, 1997, the unrealized net holding gain on available-for-sale
securities was $4.1 million compared to an unrealized net hold gain of $4.7
million at December 31, 1996. If longer-term interest rates would increase
during the second half of 1997, the Corporation could realize some investment
security losses in the last two quarters of 1997.
Other Expense
- -------------
Total other expense increased by $1.9 million or 13.9% to $15.5 million for the
three months ended June 30, 1997 and increased by $2.7 million or 9.4% to $31.1
million for the six months ended June 30, 1997 compared to the same periods in
1996. Salaries and employee benefits expense increased by $965,000 or 14.3% to
$7.7 million for the three months ended June 30, 1997 and increased by $1.3
million or 9.5% to $15.4 million for the six months ended June 30, 1997 compared
to the same periods in 1996. Included in salaries and employee benefits expense
were expenses pertaining to the payment of stock appreciation rights and the
related payroll taxes, and payroll taxes pertaining to the exercise of
nonqualifying employee stock options. The stock appreciation rights and the
stock options were exercised by the First-Knox employees during May, 1997 after
the merger with Park was completed. See Footnote 2 for information about the
merger. The additional expense due to the exercise of the stock appreciation
rights and the stock options was $339,000 for the three months ended June 30,
1997 and $437,000 for the six months ended June 30, 1997 compared to the same
periods in 1996. Full time equivalent employees were 980 at June 30, 1997
compared to 956 at June 30, 1996.
-14-
<PAGE> 15
The subcategory other expense which includes data processing expense, fees and
service charges, marketing, telephone, postage, deposit insurance premiums,
amortization of intangibles, and expenses pertaining to other real estate owned,
increased by $872,000 or 16.9% to $6.0 million for the three months ended June
30, 1997 and increased by $1.3 million or 11.4% to $12.3 million for the six
months ended June 30, 1997. The increase in the subcategory other expense for
both periods was primarily due to increases in the amortization of intangibles
and to a lesser extent increases in marketing expense and fees and service
charges. The increase in the amortization of intangibles was $360,000 for the
second quarter of 1997 and $721,000 for the first six months of 1997 compared to
the same periods in 1996.
Federal Income Taxes
- --------------------
Federal income tax expense increased by $546,000 to $4.3 million and by $1.2
million to $8.3 million for the three and six month periods ended June 30, 1997,
respectively, compared to the same periods in 1996. The ratio of federal income
tax expense to income before taxes was approximately 31% for both periods in
1997 and 1996.
Net Income
- ----------
Net income increased by $1.1 million or 13.4% to $9.55 million for the three
months ended June 30, 1997 compared to $8.42 million for the same period in
1996. For the six months ended June 30, 1997, net income increased by $2.5
million or 15.8% to $18.5 million compared to $16.0 million for the same period
in 1996. The annualized, net income to average asset ratio (ROA) was 1.73% and
1.70%, respectively, for the three and six month periods ended June 30, 1997
compared to 1.72% and 1.64%, respectively, for the same periods in 1996. The
annualized, net income to average equity ratios (ROE) was 19.25% and 18.81%,
respectively, for the three and six month periods ended June 30, 1997 compared
to 18.49% and 17.54%, respectively, for the same periods in 1996.
-15-
<PAGE> 16
COMPARISON OF FINANCIAL CONDITION
FOR JUNE 30, 1997 AND DECEMBER 31, 1996
Changes in Financial Condition and Liquidity
- --------------------------------------------
Total assets increased by $81 million or 3.7% to $2,266 million at June 30, 1997
compared to $2,185 million at December 31, 1996. Loan balances increased by $62
million to $1,534 million and federal funds sold and investment securities
increased by $18 million to $592 million.
Total liabilities increased by $70 million or 3.5% to $2,056 million at June 30,
1997 compared to $1,986 million at December 31. 1996. This increase was due to
increases in short-term borrowings and non-interest-bearing deposits. Total
borrowing increased by $62 million to $260 million at June 30, 1997. Short-term
borrowings, which primarily consist of overnight repurchase agreements with
customers, increased by $83 million to $218 million while long-term debt, which
consists of Federal Home Loan Bank advances, decreased by $21 million to $41
million at June 30, 1997. Proceeds from short-term borrowings were used to
prepay higher rate long-term debt at the end of the second quarter of 1997.
Total deposits increased by $14 million to $1,778 million at June 30, 1997 as
noninterest-bearing deposits increased by $17 million and interest-bearing
deposits decreased by $3 million.
Effective liquidity management ensures that the cash flow requirements of
depositors and borrowers, as well as the operating cash needs of the
Corporation, are met.
Funds are available from a number of sources, including the securities
portfolio, the core deposit base, Federal Home Loan Bank borrowings, and the
capability to securitize or package loans for sale. The Corporation's loan to
asset ratio was 67.7% at June 30, 1997 compared to 67.4% at December 31, 1996
and 69.4% at June 30, 1997. Cash and cash equivalents were unchanged during the
six months ended June 30, 1997 and remained at $82 million. The present funding
sources provide more than adequate liquidity for the Corporation to meet its
cash flow needs.
Capital Resources
- -----------------
Stockholders' equity at June 30, 1997 was $210.6 million or 9.29% of total
assets compared to $199.0 million or 9.11% of total assets at December 31, 1996
and $185.4 million or 9.39% of total assets at June 30, 1996.
Financial institution regulators have established guidelines for minimum capital
ratios for banks, thrifts, and bank holding companies. The net unrealized gain
or loss on available-for-sale securities is not included in computing regulatory
capital. The minimum leverage capital ratio (defined as stockholders' equity
less intangible assets) is 4% and the well capitalized ratio is greater than or
equal to 5%. Park's leverage ratio was 8.83% at June 30, 1997 and 8.73% at
December 31, 1996. The minimum Tier I risk-based capital ratio (defined as
leverage capital divided by risk-adjusted assets) is 4% and the well capitalized
ratio is greater than or equal to 6%. Park's Tier I risk-based capital ratio was
13.63% at June 30, 1997 and 13.16% at December 31, 1996. The minimum total
risk-based capital ratio (defined as leverage capital plus supplemental capital
divided by risk-adjusted assets) is 8% and the well capitalized ratio is greater
than or equal to 10%. Park's total risk-based capital ratio was 14.89% at June
30, 1997 and 14.42% at December 31, 1996.
The financial institution subsidiaries of Park each met the well capitalized
capital ratio guidelines at June 30, 1997. The following table indicates the
capital ratios for each subsidiary and Park at June 30, 1997:
-16-
<PAGE> 17
<TABLE>
<CAPTION>
Tier I Total
Leverage Risk-Based Risk-Based
-------- ---------- ----------
<S> <C> <C> <C>
Park National Bank 7.73% 10.60% 11.87%
Richland Trust Company 6.56% 11.69% 12.96%
Century National Bank 8.24% 14.18% 15.44%
First-Knox National Bank 7.40% 12.53% 13.78%
Farmers and Savings Bank 8.19% 12.27% 13.52%
Park National Corporation 8.83% 13.63% 14.89%
Minimum Capital Ratio 4.00% 4.00% 8.00%
Well Capitalized Ratio 5.00% 6.00% 10.00%
</TABLE>
Mutual Federal Savings Bank converted from a thrift charter to a national
commercial bank charter effective April 7, 1997 and accordingly changed its name
to Century National Bank.
At the July 21, 1997 Park National Corporation Board of Directors' Meeting, a
cash dividend of $.40 per share was declared payable on September 10, 1997 to
stockholders of record on August 22, 1997.
-17-
<PAGE> 18
PARK NATIONAL CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Park National Corporation is not engaged in any legal proceedings of a
material nature at the present time.
Item 2. Changes in Securities
---------------------
Not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5. Other Information
-----------------
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
See Exhibit Index at Page 20
b. Reports on Form 8-K
-------------------
A Form 8-K was filed by Park on May 19, 1997 announcing
the acquisition of First-Knox. Included in the filing
were a condensed pro forma combined balance sheet of Park
and First-Knox as of March 31, 1997 and condensed pro
forma combined statements of income for the quarters
ended March 31, 1997 and 1996.
-18-
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARK NATIONAL CORPORATION
DATE: August 12, 1997 BY: /s/ C. Daniel DeLawder
------------------------- ------------------------------------
C. Daniel DeLawder
President
DATE: August 12, 1997 BY: /s/ David C. Bowers
------------------------- ------------------------------------
David C. Bowers
Chief Financial Officer/Secretary
-19-
<PAGE> 20
PARK NATIONAL CORPORATION
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3(a)1 Certificate of Amendment by Shareholders
to the Articles of Incorporation of Park
National Corporation as filed with the
Ohio Secretary of State on April 22,
1997.
3(a)2 Articles of Incorporation of Park
National Corporation (reflecting
amendments through April 22, 1997) (for
SEC reporting compliance purposes only;
not filed with Ohio Secretary of State)
3(b)1 Certified Resolution regarding adoption
of amendment to Subsection 2.02(A) of
the Regulations of Park National
Corporation by shareholders on April 21,
1997.
3(b)2 Regulations of Park National Corporation
(reflecting amendments through April 21,
1997) (For SEC reporting compliance
purposes only)
27 Financial Data Schedule
-20-
<PAGE> 1
EXHIBIT 3(a)(1)
---------------
CERTIFICATE OF AMENDMENT
BY SHAREHOLDERS TO THE
ARTICLES OF INCORPORATION
OF PARK NATIONAL CORPORATION
AS FILED WITH THE OHIO SECRETARY
OF STATE ON APRIL 22, 1997
<PAGE> 2
[Seal of Ohio Secretary of State]
Prescribed by
BOB TAFT, Secretary of State Charter No. 815582
30 East Broad Street, 14th Floor Approved CR
Columbus, Ohio 43266-0418 Date: 4-22-97
Form SH-AMD (January 1991) Fee 35 -
97042256301
CERTIFICATE OF AMENDMENT
BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF
- --------------------------------------------------------------------------------
Park National Corporation
(Name of Corporation)
C. Daniel Delawder, who is:
- ------------------
[ ] Chairman of the Board [X] President [ ] Vice President (Check One)
and
David C. Bowers, who is: [X] Secretary [ ] Assistant Secretary (Check One)
- ---------------
of the above name Ohio corporation for profit do hereby certify that: (check the
appropriate box and complete the appropriate statements)
[X] a meeting of the shareholders was duly called for the purpose of
adopting this amendment and held on April 21, 1997 at which meeting a
quorum of the shareholders was present in person or by proxy, and by
the affirmative vote of the holders of shares entitling them to
exercise 86.3% of the voting power of the corporation.
[ ] in a writing signed by all of the shareholders who would be entitled to
notice of a meeting held for that purpose, the following resolution to
amend the articles was adopted:
Please see Annex 1 for resolution adopted by shareholders to
amend Article SIXTH of Articles of Incorporation
IN WITNESS WHEREOF, the above named officers, acting for and on the
behalf of the corporation, have hereto subscribed their names this 21st day of
April, 1997.
By /s/ C. Daniel DeLawder
--------------------------------
C. Daniel DeLawder, President
By /s/ David C. Bowers
--------------------------------
David C. Bowers, Secretary
NOTE: Ohio law does not permit one officer to sign in two capacities. Two
separate signatures are required, even if this necessitates the election of a
second officer before the filing can be made.
<PAGE> 3
Annex 1
-------
RESOLVED, that the Articles of Incorporation of Park National
Corporation be, and the same hereby are, amended by deleting present Article
SIXTH in its entirety and by substituting in its place new Article SIXTH in the
following form:
ARTICLE SIXTH
OF
THE ARTICLES OF INCORPORATION
OF
PARK NATIONAL CORPORATION
SIXTH: The holders of the shares of any class of the
Corporation shall, upon the offering or sale of any shares of
the Corporation of the same class, have the right, during a
reasonable time and on reasonable terms fixed by the
directors, to purchase such shares in proportion to their
respective holdings of shares of such class at the price fixed
for the sale of the shares, unless (A) the shares offered or
sold are treasury shares; OR (B) the shares offered or sold
are issued as a share dividend or distribution; OR (C) the
shares are offered or sold in connection with any merger or
consolidation to which the Corporation is a party or any
acquisition of, or investment in, another corporation,
partnership, proprietorship or other business entity or its
assets by the Corporation, whether directly or indirectly, by
any means whatsoever; OR (D) the shares are offered or sold
pursuant to the terms of a stock option plan or employee
benefit, compensation or incentive plan, which stock option
plan or employee benefit, compensation or incentive plan is
approved by the holders of three-fourths of the issued and
outstanding shares of the Corporation; OR (E) the shares
offered or sold are released from preemptive rights by the
affirmative vote or written consent of the holders of
two-thirds of the shares entitled to such preemptive rights.
<PAGE> 1
EXHIBIT 3(a)(2)
---------------
ARTICLES OF INCORPORATION OF PARK NATIONAL
CORPORATION (REFLECTING AMENDMENTS
THROUGH APRIL 22, 1997)
[FOR PURPOSES OF SEC REPORTING COMPLIANCE ONLY]
<PAGE> 2
ARTICLES OF INCORPORATION
OF
PARK NATIONAL CORPORATION
(reflecting amendments through April 22, 1997)
[For purposes of SEC reporting compliance only]
FIRST: The name of the corporation shall be Park National
Corporation (the "Corporation").
SECOND: The place in Ohio where the principal office of the
Corporation is to be located is in the City of Newark, County of Licking.
THIRD: The purpose for which the Corporation is formed is to
engage in any lawful act or activity for which corporations may be formed under
Sections 1701.01 to 1701.98 of the Ohio Revised Code.
FOURTH: The authorized number of shares of the Corporation
shall be 20,000,000, all of which shall be common shares, each without par
value.
FIFTH: The directors of the Corporation shall have the power
to cause the Corporation from time to time and at any time to purchase, hold,
sell, transfer or otherwise deal with (A) shares of any class or series issued
by it, (B) any security or other obligation of the Corporation which may confer
upon the holder thereof the right to convert the same into shares of any class
or series authorized by the Articles of the Corporation, and (C) any security or
other obligation which may confer upon the holder thereof the right to purchase
shares of any class or series authorized by the Articles of the Corporation. The
Corporation shall have the right to repurchase, if and when any shareholder
desires to sell, or on the happening of any event is required to sell, shares of
any class or series issued by the Corporation. The authority granted in this
Article FIFTH of these Articles shall not limit the plenary authority of the
directors to purchase, hold, sell, transfer or otherwise deal with shares of any
class or series, securities, or other obligations issued by the Corporation or
authorized by its Articles.
SIXTH: The holders of the shares of any class of the
Corporation shall, upon the offering or sale of any shares of the
<PAGE> 3
Corporation of the same class, including treasury shares, have the right, during
a reasonable time and on reasonable terms fixed by the directors, to purchase
such shares in proportion to their respective holdings of shares of such class
at the price fixed for the sale of the shares, unless (A) the shares offered or
sold are treasury shares; OR (B) the shares offered or sold are issued as a
share dividend or distribution; OR (C) the shares are offered or sold in
connection with any merger or consolidation to which the Corporation is a party
or any acquisition of, or investment in, another corporation, partnership,
proprietorship or other business entity or its assets by the Corporation whether
directly or indirectly, by any means whatsoever; OR (D) the shares are offered
or sold pursuant to the terms of a stock option plan or employee benefit,
compensation or incentive plan, which stock option plan or employee benefit,
compensation or incentive plan is approved by the holders of three-fourths of
the issued and outstanding shares of the Corporation; OR (E) the shares offered
or sold are released from preemptive rights by the affirmative vote or written
consent of the holders of two-thirds of the shares entitled to such preemptive
rights.
SEVENTH: Chapter 1704 of the Ohio Revised Code does not apply
to the Corporation.
EIGHTH: (A) In addition to any affirmative vote required by
any provision of the Ohio Revised Code or by any other provision of these
Articles, the affirmative vote or consent of the holders of the greater of (i)
four-fifths (4/5) of the outstanding common shares of the Corporation entitled
to vote thereon or (ii) that fraction of such outstanding common shares having
as the numerator a number equal to the sum of (a) the number of outstanding
common shares Beneficially Owned by Controlling Persons (as hereinafter defined)
plus (b) two-thirds (2/3) of the remaining number of outstanding common shares,
and as the denominator a number equal to the total number of outstanding common
shares entitled to vote, shall be required for the adoption or authorization of
a Business Combination (as hereinafter defined) unless:
(1) The Business Combination will result in an involuntary
sale, redemption, cancellation or other termination of ownership of all common
shares of the Corporation owned by shareholders who do not vote in favor of, or
consent in writing to, the Business Combination and the cash or fair value of
other readily marketable consideration to be received by such shareholders for
such common shares shall at least be equal to the Minimum Price Per Share (as
hereinafter defined); and
(2) A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 shall be mailed to
<PAGE> 4
the shareholders of the Corporation for the purpose of soliciting shareholder
approval of the proposed Business Combination.
(B) For purposes of this Article EIGHTH, the following
definitions shall apply:
(1) "Affiliate" shall mean a Person that directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, another Person.
(2) "Associate" shall mean (a) any corporation or
organization of which a Person is an officer or partner or is, directly or
indirectly, the Beneficial Owner of ten percent (10%) or more of any class of
equity securities, (b) any trust or other estate in which a Person has a ten
percent (10%) or greater individual interest of any nature or as to which a
Person serves as trustee or in a similar fiduciary capacity, (c) any spouse of a
Person, and (d) any relative of a Person, or any relative of a spouse of a
Person, who has the same residence as such Person or spouse.
(3) "Beneficial Ownership" shall include without limitation
(a) all shares directly or indirectly owned by a Person, by an Affiliate of such
Person or by an Associate of such Person or such Affiliate, (b) all shares which
such Person, Affiliate or Associate has the right to acquire through the
exercise of any option, warrant or right (whether or not currently exercisable),
through the conversion of a security, pursuant to the power to revoke a trust,
discretionary account or similar arrangement, or pursuant to the automatic
termination of a trust, discretionary account or similar arrangement; and (c)
all shares as to which such Person, Affiliate or Associate directly or
indirectly through any contract, arrangement, understanding, relationship or
otherwise (including without limitation any written or unwritten agreement to
act in concert) has or shares voting power (which includes the power to vote or
to direct the voting of such shares) or investment power (which includes the
power to dispose or direct the disposition of such shares) or both.
(4) "Business Combination" shall mean (a) any merger or
consolidation of the Corporation with or into a Controlling Person or an
Affiliate of a Controlling Person or an Associate of such Controlling Person or
Affiliate, (b) any sale, lease, exchange, transfer or other disposition,
including without limitation a mortgage or any other security device, of all or
any Substantial Part of the assets of the Corporation, including without
limitation any voting securities of a Subsidiary, or of the assets of a
Subsidiary, to a Controlling Person or Affiliate of a Controlling Person or
Associate of such Controlling Person
<PAGE> 5
or Affiliate, (c) any merger into the Corporation, or into a Subsidiary, of a
Controlling Person or an Affiliate of a Controlling Person or an Associate of
such Controlling Person or Affiliate, (d) any sale, lease, exchange, transfer or
other disposition to the Corporation or a Subsidiary of all or any part of the
assets of a Controlling Person or Affiliate of a Controlling Person or Associate
of such Controlling Person or Affiliate but not including any disposition of
assets which, if included with all other dispositions consummated during the
same fiscal year of the Corporation by the same Controlling Person, Affiliates
thereof and Associates of such Controlling Person or Affiliates, would not
result in dispositions during such year by all such Persons of assets having an
aggregate fair value (determined at the time of disposition of the respective
assets) in excess of one percent (1%) of the total consolidated assets of the
Corporation (as shown on its certified balance sheet as of the end of the fiscal
year preceding the proposed disposition); provided, however, that in no event
shall any disposition of assets be excepted from shareholder approval by reason
of the preceding exclusion if such disposition when included with all other
dispositions consummated during the same and immediately preceding four (4)
fiscal years of the Corporation by the same Controlling Person, Affiliates
thereof and Associates of such Controlling Person or Affiliates, would result in
disposition by all such Persons of assets having an aggregate fair value
(determined at the time of disposition of the respective assets) in excess of
two percent (2%) of the total consolidated assets of the Corporation (as shown
on its certified balance sheet as of the end of the fiscal year preceding the
proposed disposition), (e) any reclassification of the common shares of the
Corporation, or any recapitalization involving common shares of the Corporation,
consummated within five (5) years after a Controlling Person becomes a
Controlling Person, and (f) any agreement, contract or other arrangement
providing for any of the transactions described in the definition of Business
Combination.
(5) "Control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
(6) "Controlling Person" shall mean any Person who
Beneficially Owns shares of the Corporation entitling that Person to exercise
twenty percent (20%) or more of the voting power of the Corporation entitled to
vote in the election of directors.
(7) "Minimum Price Per Share" shall mean the sum of (a) the
higher of either (i) the highest gross per share price paid or agreed to be paid
to acquire any common shares of the
<PAGE> 6
Corporation Beneficially Owned by a Controlling Person, provided such payment or
agreement to make payment was made within five (5) years immediately prior to
the record date set to determine the shareholders entitled to vote or consent to
the Business Combination in question, or (ii) the highest per share closing
public market price for such common shares during such five (5) year period,
plus (b) the aggregate amount, if any, by which five percent (5%) for each year,
beginning on the date on which such Controlling Person became a Controlling
Person, of such higher per share price exceeds the aggregate amount of all
common share dividends per share paid in cash since the date on which such
Person became a Controlling Person. The calculation of the Minimum Price Per
Share shall require appropriate adjustments for capital changes, including
without limitation stock splits, stock dividends and reverse stock splits.
(8) "Person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any unincorporated
organization, a government or political subdivision thereof, and any other
entity.
(9) "Securities Exchange Act of 1934" shall mean the
Securities Exchange Act of 1934, as amended from time to time as well as any
successor or replacement statute.
(10) "Subsidiary" shall mean any corporation more than
twenty-five percent (25%) of whose outstanding securities entitled to vote for
the election of directors are Beneficially Owned by the Corporation and/or one
or more Subsidiaries.
(11) "Substantial Part" shall mean more than ten percent
(10%) of the total assets of the corporation in question, as shown on its
certified balance sheet as of the end of the most recent fiscal year ending
prior to the time the determination is being made.
(C) During any period in which there are one or more
Controlling Persons, this Article EIGHTH shall not be altered, changed or
repealed unless the amendment effecting such alteration, change or repeal shall
have received, in addition to any affirmative vote required by any provision of
the Ohio Revised Code or by any other provision of these Articles, the
affirmative vote or consent of the holders of the greater of (i) four-fifths
(4/5) of the outstanding common shares of the Corporation entitled to vote
thereon or (ii) that fraction of such outstanding common shares having as the
numerator a number equal to the sum of (a) the number of outstanding common
shares Beneficially Owned by Controlling Persons plus (b) two-thirds (2/3) of
the remaining number of outstanding common shares, and as the
<PAGE> 7
denominator a number equal to the total number of outstanding common shares
entitled to vote.
<PAGE> 1
EXHIBIT 3(b)(1)
---------------
CERTIFIED RESOLUTION REGARDING ADOPTION OF AMENDMENT
TO SUBSECTION 2.02(A) OF THE REGULATIONS
OF PARK NATIONAL CORPORATION BY SHAREHOLDERS
ON APRIL 21, 1997
<PAGE> 2
CERTIFICATE
-----------
The undersigned hereby certifies that he is the duly elected,
qualified and acting Secretary of Park National Corporation (the "Corporation");
and that the resolution set forth below was duly adopted by the shareholders at
the 1997 Annual Meeting of the Shareholders (the "Annual Meeting") of the
Corporation held on April 21, 1997:
RESOLUTION REGARDING ADOPTION OF
AMENDMENT TO SUBSECTION 2.02(A) OF
THE REGULATIONS
RESOLVED, that Section 2.02 of the Company's Regulations be
amended by deleting the existing Subsection 2.02(A) in its entirety and
substituting therefor the following new Subsection 2.02(A):
Section 2.02. Number of Directors and Term of Office.
------------------------------------------------------
(A) The number of directors of the corporation may be
determined at a meeting of the shareholders called
for the purpose of electing directors at which a
quorum is present, by the affirmative vote of the
holders of not less than a majority of the voting
shares which are represented at the meeting, in
person or by proxy, and entitled to vote on such
proposal; or by resolution adopted by the
affirmative vote of a majority of the directors
then in office. Notwithstanding the foregoing, the
number of directors shall in no event be fewer
than five or more than sixteen and the directors
may not increase the number of directors to a
number which exceeds by
<PAGE> 3
more than two the number of directors last
elected by the shareholders.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate this 19th day of May, 1997.
/S/David C. Bowers
--------------------------
David C. Bowers, Secretary
<PAGE> 1
EXHIBIT 3(b)(2)
---------------
REGULATIONS OF PARK NATIONAL CORPORATION
(REFLECTING AMENDMENTS THROUGH APRIL 21, 1997)
[FOR PURPOSES OF SEC REPORTING COMPLIANCE ONLY]
<PAGE> 2
REGULATIONS
OF
PARK NATIONAL CORPORATION
(REFLECTING AMENDMENTS THROUGH APRIL 21, 1997)
[FOR PURPOSES OF SEC REPORTING COMPLIANCE ONLY]
INDEX
<TABLE>
<CAPTION>
SECTION CAPTION PAGE NO.
- ------- ------- --------
<S> <C> <C>
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
1.01 Annual Meetings.............................................. 1
1.02 Calling of Meetings.......................................... 1
1.03 Place of Meetings............................................ 1
1.04 Notice of Meetings........................................... l
1.05 Waiver of Notice............................................. 2
1.06 Quorum....................................................... 2
1.07 Votes Required............................................... 2
1.08 Order of Business............................................ 3
1.09 Shareholders Entitled to Vote................................ 3
1.10 Cumulative Voting............................................ 3
1.11 Proxies...................................................... 3
1.12 Inspectors of Election....................................... 4
ARTICLE TWO
DIRECTORS
2.01 Authority and Qualifications................................. 4
2.02 Number of Directors and Term of Office....................... 4
2.03 Nomination and Election...................................... 5
2.04 Removal...................................................... 6
2.05 Vacancies.................................................... 6
2.06 Meetings..................................................... 7
2.07 Notice of Meetings........................................... 7
2.08 Waiver of Notice............................................. 8
2.09 Quorum....................................................... 8
2.10 Executive Committee.......................................... 8
2.11 Compensation................................................. 9
2.12 By-Laws...................................................... 9
ARTICLE THREE
OFFICERS
3.01 Officers..................................................... 9
3.02 Tenure of Office............................................. 9
3.03 Chief Executive Officer...................................... 9
3.04 Chairman of the Board........................................ 10
3.05 President.................................................... 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.06 Vice Presidents.............................................. 10
3.07 Secretary.................................................... 10
3.08 Treasurer.................................................... 10
ARTICLE FOUR
SHARES
4.01 Certificates................................................. 11
4.02 Transfers.................................................... 11
4.03 Transfer Agents and Registrars...............................
4.04 Lost, Wrongfully Taken or Destroyed Certificates............. 11
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
5.01 Mandatory Indemnification.................................... 12
5.02 Court-Approved Indemnification............................... 13
5.03 Indemnification for Expenses ................................ 13
5.04 Determination Required....................................... 13
5.05 Advances for Expenses........................................ 14
5.06 Article FIVE Not Exclusive................................... 15
5.07 Insurance.................................................... 15
5.08 Certain Definitions.......................................... 15
5.09 Venue........................................................ 16
ARTICLE SIX
MISCELLANEOUS
6.01 Amendments................................................... 16
6.02 Action by Shareholders or Directors Without a Meeting........ 17
6.03 Section 1701.831 of the Ohio Revised Code Not Applicable..... 17
</TABLE>
ii
<PAGE> 4
REGULATIONS
OF
PARK NATIONAL CORPORATION
(reflecting amendments through April 21, 1997)
[For purposes of SEC reporting compliance only]
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETINGS. The annual meeting of the
shareholders for the election of directors, for the consideration of reports to
be laid before such meeting and for the transaction of such other business as
may properly come before such meeting, shall be held on the third Monday of
April in each year or on such other date as may be fixed from time to time by
the directors.
SECTION 1.02. CALLING OF MEETINGS. Meetings of the
shareholders may be called only by the chairman of the board, the president, or,
in case of the president's absence, death, or disability, the vice president
authorized to exercise the authority of the president; the secretary; the
directors by action at a meeting, or a majority of the directors acting without
a meeting; or the holders of at least twenty-five percent of all shares
outstanding and entitled to vote thereat.
SECTION 1.03. PLACE OF MEETINGS. All meetings of shareholders
shall be held at the principal office of the corporation, unless otherwise
provided by action of the directors. Meetings of shareholders may be held at any
place within or without the State of Ohio.
SECTION 1.04. NOTICE OF MEETINGS. (A) Written notice stating
the time, place and purposes of a meeting of the shareholders shall be given
either by personal delivery or by mail not less than seven nor more than sixty
days before the date of the meeting, (1) to each shareholder of record entitled
to notice of the meeting, (2) by or at the direction of the president or the
secretary. If mailed, such notice shall be addressed to the shareholder at his
address as it appears on the records of the corporation. Notice of adjournment
of a meeting need not be given if the time and place to which it is adjourned
are fixed and announced at such meeting. In the event of a transfer of shares
after the record date for determining the shareholders who are entitled to
receive notice of a meeting of
<PAGE> 5
shareholders, it shall not be necessary to give notice to the transferee.
Nothing herein contained shall prevent the setting of a record date in the
manner provided by law, the Articles or the Regulations for the determination of
shareholders who are entitled to receive notice of or to vote at any meeting of
shareholders or for any purpose required or permitted by law.
(B) Following receipt by the president or the secretary of a
request in writing, specifying the purpose or purposes for which the persons
properly making such request have called a meeting of the shareholders,
delivered either in person or by registered mail to such officer by any persons
entitled to call a meeting of shareholders, such officer shall cause to be given
to the shareholders entitled thereto notice of a meeting to be held on a date
not less than seven nor more than sixty days after the receipt of such request,
as such officer may fix. If such notice is not given within fifteen days after
the receipt of such request by the president or the secretary, then, and only
then, the persons properly calling the meeting may fix the time of meeting and
give notice thereof in accordance with the provisions of the Regulations.
SECTION 1.05. WAIVER OF NOTICE. Notice of the time, place and
purpose or purposes of any meeting of shareholders may be waived in writing,
either before or after the holding of such meeting, by any shareholders, which
writing shall be filed with or entered upon the records of such meeting. The
attendance of any shareholder, in person or by proxy, at any such meeting
without protesting the lack of proper notice, prior to or at the commencement of
the meeting, shall be deemed to be a waiver by such shareholder of notice of
such meeting.
SECTION 1.06. QUORUM. At any meeting of shareholders, the
holders of a majority of the voting shares of the corporation then outstanding
and entitled to vote thereat, present in person or by proxy, shall constitute a
quorum for such meeting. The holders of a majority of the voting shares
represented at a meeting, whether or not a quorum is present, or the chairman of
the board, the president, or the officer of the corporation acting as chairman
of the meeting, may adjourn such meeting from time to time, and if a quorum is
present at such adjourned meeting any business may be transacted as if the
meeting had been held as originally called.
SECTION 1.07. VOTES REQUIRED. At all elections of directors,
the candidates receiving the greatest number of votes shall be elected. Any
other matter submitted to the shareholders for their vote shall be decided by
the vote of such proportion of the shares, or of any class of shares, or of each
class, as is required by law, the Articles or the Regulations.
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SECTION 1.08. ORDER OF BUSINESS. The order of business at any
meeting of shareholders shall be determined by the officer of the corporation
acting as chairman of such meeting unless otherwise determined by a vote of the
holders of a majority of the voting shares of the corporation then outstanding,
present in person or by proxy, and entitled to vote at such meeting.
SECTION 1.09. SHAREHOLDERS ENTITLED TO VOTE. Each shareholder
of record on the books of the corporation on the record date for determining the
shareholders who are entitled to vote at a meeting of shareholders shall be
entitled at such meeting to one vote for each share of the corporation standing
in his name on the books of the corporation on such record date. The directors
may fix a record date for the determination of the shareholders who are entitled
to receive notice of and to vote at a meeting of shareholders, which record date
shall not be a date earlier than the date on which the record date is fixed and
which record date may be a maximum of sixty days preceding the date of the
meeting of shareholders.
SECTION 1.10. CUMULATIVE VOTING. If notice in writing shall be
given by a shareholder to the president, a vice president or the secretary of
the corporation, not less than forty-eight hours before the time fixed for
holding a meeting of the shareholders for the purpose of electing directors if
notice of such meeting shall have been given at least ten days prior thereto,
and otherwise not less than twenty-four hours before such time, that such
shareholder desires that the voting at such election shall be cumulative, and if
an announcement of the giving of such notice is made upon the convening of the
meeting by the chairman or secretary or by or on behalf of the shareholder
giving such notice, each shareholder shall have the right to cumulate such
voting power as he possesses and to give one candidate as many votes as is
determined by multiplying the number of directors to be elected by the number of
votes to which such shareholder is entitled, or to distribute such number of
votes on the same principle among two or more candidates, as he sees fit.
SECTION 1.11. PROXIES. At meetings of the shareholders, any
shareholder of record entitled to vote thereat may be represented and may vote
by a proxy or proxies appointed by an instrument in writing signed by such
shareholder, but such instrument shall be filed with the secretary of the
meeting before the person holding such proxy shall be allowed to vote
thereunder. No proxy shall be valid after the expiration of eleven months after
the date of its execution, unless the
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shareholder executing it shall have specified therein the length of time it is
to continue in force.
SECTION 1.12. INSPECTORS OF ELECTION. In advance of any
meeting of shareholders, the directors may appoint inspectors of election to act
at such meeting or any adjournment thereof; if inspectors are not so appointed,
the officer of the corporation acting as chairman of any such meeting may make
such appointment. In case any person appointed as inspector fails to appear or
act, the vacancy may be filled only by appointment made by the directors in
advance of such meeting or, if not so filled, at the meeting by the officer of
the corporation acting as chairman of such meeting. No other person or persons
may appoint or require the appointment of inspectors of election.
ARTICLE TWO
DIRECTORS
SECTION 2.01. AUTHORITY AND QUALIFICATIONS. Except where the
law, the Articles or the Regulations otherwise provide, all authority of the
corporation shall be vested in and exercised by its directors. Directors must be
shareholders of the corporation.
SECTION 2.02. NUMBER OF DIRECTORS AND TERM OF OFFICE.
(A) The number of directors of the corporation may be
determined at a meeting of the shareholders called for the purpose of electing
directors at which a quorum is present, by the affirmative vote of the holders
of not less than a majority of the voting shares which are represented at the
meeting, in person or by proxy, and entitled to vote on such proposal; or by
resolution adopted by the affirmative vote of a majority of the directors then
in office. Notwithstanding the foregoing, the number of directors shall in no
event be fewer than five or more than sixteen and the directors may not increase
the number of directors to a number which exceeds by more than two the number of
directors last elected by the shareholders.
(B) The board of directors shall be divided into three classes
as nearly equal in number as the then fixed number of directors permits, with
the term of office of one class expiring each year. The election of each class
of directors shall be a separate election. At the first meeting of shareholders,
directors of one class shall be elected to hold office for a term expiring at
the 1993 annual meeting, directors of another class shall be elected to hold
office for a term expiring at the 1994
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annual meeting and directors of another class shall be elected to hold office
for a term expiring at the 1995 annual meeting. At the 1993 annual meeting of
shareholders and each succeeding annual meeting, successors to the class of
directors whose term then expires shall be elected to hold office for a
three-year term. A director shall hold office until the annual meeting for the
year in which his term expires and until his successor is duly elected and
qualified, or until his earlier resignation, removal from office or death. In
the event of any increase in the number of directors of the corporation, the
additional directors shall be similarly classified in such a manner that each
class of directors shall be as equal in number as possible. In the event of any
decrease in the number of directors of the corporation, such decrease shall be
effected in such a manner that each class of directors shall be as equal in
number as possible.
(C) The directors may fill any director's office that is
created by an increase in the number of directors.
(D) No reduction in the number of directors shall of itself
have the effect of shortening the term of any incumbent director.
SECTION 2.03. NOMINATION AND ELECTION.
(A) Any nominee for election as a director of the corporation
may be proposed only by or at the direction of the board of directors or by any
shareholder entitled to vote for the election of directors. Nominations, other
than those made by or at the direction of the board of directors, shall be made
in writing and shall be delivered or mailed to the president of the corporation
not less than fourteen days nor more than fifty days prior to any meeting of
shareholders called for the election of directors; provided, however, that if
less than twenty-one days' notice of the meeting is given to shareholders, such
nomination shall be mailed or delivered to the president of the corporation not
later than the close of business on the seventh day following the day on which
the notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder:
(1) the name and address of each proposed nominee;
(2) the principal occupation of each proposed nominee;
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(3) the total number of shares of capital stock of the
corporation that will be voted for each proposed
nominee;
(4) the name and residence address of the notifying
shareholder; and
(5) the number of shares of capital stock of the
corporation beneficially owned by the notifying
shareholder.
(B) If a shareholder shall attempt to nominate one or more
persons for election as a director at any meeting at which directors are to be
elected without having identified each such person in a written notice given as
contemplated by, and/or without having provided therein the information
specified in, division (A) of this Section, each such attempted nomination shall
be invalid and shall be disregarded unless the person acting as chairman of the
meeting determines that the facts warrant the acceptance of such nomination.
(C) The election of directors shall be by ballot whenever
requested by the presiding officer of the meeting or by the holders of a
majority of the voting shares outstanding, entitled to vote at such meeting and
present in person or by proxy, but unless such request is made, the election
shall be by voice vote.
SECTION 2.04. REMOVAL. A director or directors may be removed
from office, with or without assigning any cause, only by the vote of the
holders of shares entitling them to exercise not less than a majority of the
voting power of the corporation to elect directors in place of those to be
removed, provided that unless all the directors, or all the directors of a
particular class (if the directors of the corporation are divided into classes),
are removed, no individual director shall be removed in case the votes of a
sufficient number of shares are cast against his removal that, if cumulatively
voted at an election of all directors, or all the directors of a particular
class, as the case may be, would be sufficient to elect at least one director.
In case of any such removal, a new director may be elected at the same meeting
for the unexpired term of each director removed. Failure to elect a director to
fill the unexpired term of any director removed shall be deemed to create a
vacancy in the board.
SECTION 2.05. VACANCIES. The remaining directors, though less
than a majority of the whole authorized number of directors, may, by the vote of
a majority of their number, fill any vacancy in the board for the unexpired
term. A vacancy in
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the board exists within the meaning of this Section 2.05 in case the
shareholders increase the authorized number of directors but fail at the meeting
at which such increase is authorized, or an adjournment thereof, to elect the
additional directors provided for, or in case the shareholders fail at any time
to elect the whole authorized number of directors.
SECTION 2.06. MEETINGS. A meeting of the directors shall be
held immediately following the adjournment of each annual meeting of
shareholders at which directors are elected, and notice of such meeting need not
be given. The directors shall hold such other meetings as may from time to time
be called, and such other meetings of directors may be called only by the
chairman of the board, the president, or any two directors. All meetings of
directors shall be held at the principal office of the corporation in Newark,
Ohio or at such other place within or without the State of Ohio, as the
directors may from time to time determine by a resolution. Meetings of the
directors may be held through any communications equipment if all persons
participating can hear each other and participation in a meeting pursuant to
this provision shall constitute presence at such meeting.
SECTION 2.07. NOTICE OF MEETINGS. Notice of the time and place
of each meeting of directors for which such notice is required by law, the
Articles, the Regulations or the By-Laws shall be given to each of the directors
by at least one of the following methods:
(A) In a writing mailed not less than three days before
such meeting and addressed to the residence or usual
place of business of a director, as such address
appears on the records of the corporation; or
(B) By telegraph, cable, radio, wireless, or a writing
sent or delivered to the residence or usual place of
business of a director as the same appears on the
records of the corporation, not later than the day
before the date on which such meeting is to be held;
or
(C) Personally or by telephone not later than the day
before the date on which such meeting is to be held.
Notice given to a director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
directors need not be uniform. Notice of any meeting of directors may be given
only by the chairman of the
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board, the president or the secretary of the corporation. Any such notice need
not specify the purpose or purposes of the meeting. Notice of adjournment of a
meeting of directors need not be given if the time and place to which it is
adjourned are fixed and announced at such meeting.
SECTION 2.08. WAIVER OF NOTICE. Notice of any meeting of
directors may be waived in writing, either before or after the holding of such
meeting, by any director, which writing shall be filed with or entered upon the
records of the meeting. The attendance of any director at any meeting of
directors without protesting, prior to or at the commencement of the meeting,
the lack of proper notice, shall be deemed to be a waiver by him of notice of
such meeting.
SECTION 2.09. QUORUM. A majority of the directors then in
office shall be necessary to constitute a quorum for a meeting of directors. The
act of a majority of the directors present at a meeting at which a quorum is
present is the act of the board, except as otherwise provided by law, the
Articles or the Regulations.
SECTION 2.10. EXECUTIVE COMMITTEE. The directors may create an
executive committee or any other committee of directors, to consist of not less
than three directors, and may authorize the delegation to such executive
committee or other committees of any of the authority of the directors, however
conferred, other than that of filling vacancies among the directors or in the
executive committee or in any other committee of the directors.
Such executive committee or any other committee of directors
shall serve at the pleasure of the directors, shall act only in the intervals
between meetings of the directors, and shall be subject to the control and
direction of the directors. Such executive committee or other committee of
directors may act by a majority of its members at a meeting or by a writing or
writings signed by all of its members.
Any act or authorization of any act by the executive committee
or any other committee within the authority delegated to it shall be as
effective for all purposes as the act or authorization of the directors. No
notice of a meeting of the executive committee or of any other committee of
directors shall be required. A meeting of the executive committee or of any
other committee of directors may be called only by the president or by a member
of such executive or other committee of directors. Meetings of the executive
committee or of any other committee of directors may be held through any
communications equipment if all
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persons participating can hear each other and participation in such a meeting
shall constitute presence thereat.
SECTION 2.11. COMPENSATION. Directors shall be entitled to
receive as compensation for services rendered and expenses incurred as
directors, such amounts as the directors may determine.
SECTION 2.12. BY-LAWS. The directors may adopt, and amend from
time to time, By-Laws for their own government, which By-Laws shall not be
inconsistent with the law, the Articles or the Regulations.
ARTICLE THREE
OFFICERS
SECTION 3.01. OFFICERS. The officers of the corporation to be
elected by the directors shall be a president, a secretary, a treasurer, and, if
desired, one or more vice presidents and such other officers and assistant
officers as the directors may from time to time elect. The directors shall elect
a chairman of the board, who must be a director. Officers need not be
shareholders of the corporation, and may be paid such compensation as the board
of directors may determine. Any two or more offices may be held by the same
person, but no officer shall execute, acknowledge, or verify any instrument in
more than one capacity if such instrument is required by law, the Articles, the
Regulations or the By-Laws to be executed, acknowledged, or verified by two or
more officers.
SECTION 3.02. TENURE OF OFFICE. The officers of the
corporation shall hold office at the pleasure of the directors. Any officer of
the corporation may be removed, either with or without cause, at any time, by
the affirmative vote of a majority of all the directors then in office; such
removal, however, shall be without prejudice to the contract rights, if any, of
the person so removed.
SECTION 3.03. CHIEF EXECUTIVE OFFICER. The chief executive
officer of the corporation, who shall be a member of the board of directors and
shall also be either the chairman of the board or the president (or if the
chairman of the board and the president shall be absent or unable to act, a vice
president), shall be such officer who from time to time is so designated by the
directors. The chief executive officer shall have general and active management
of the business of the corporation and shall see that all orders and regulations
of the directors are carried into effect. The chief executive officer
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shall perform all duties incident to the office of chief executive officer and
shall have and may exercise such other powers and duties as from time to time
may be conferred upon or assigned to him by the directors.
SECTION 3.04. CHAIRMAN OF THE BOARD. The directors shall
appoint one of the directors to be chairman of the board to serve at the
pleasure of the directors. Such person shall preside at all meetings of the
directors and at all meetings of the shareholders. He shall have and may
exercise such other powers and duties as from time to time may be conferred upon
or assigned to him by the directors.
SECTION 3.05. PRESIDENT. The directors shall appoint one of
the directors to be president of the corporation. In the absence of the chairman
of the board, he shall preside at any meeting of the directors and at any
meeting of the shareholders. The president shall have and may exercise such
other powers and duties as from time to time may be conferred upon or assigned
to him by the directors.
SECTION 3.06. VICE PRESIDENTS. The directors may appoint one
or more vice presidents, one or more executive vice presidents and one or more
senior vice presidents. Each officer shall have and may exercise such powers and
duties as from time to time may be conferred upon or assigned to him by the
directors.
SECTION 3.07. SECRETARY. The directors shall appoint and
designate an officer who shall be secretary of the corporation and shall keep
minutes of all proceedings of the shareholders and the directors and make a
proper record of the same. The secretary shall attend to the giving of all
notices required by law, the Articles or the Regulations to be given; shall be
custodian of the records, documents and papers of the corporation; shall provide
for the keeping of proper records of all transactions of the corporation; shall
have and may exercise any and all powers and duties pertaining to the office of
secretary as may be required by law, the Articles or the Regulations; and upon
the expiration of his term of office, shall deliver all records, documents,
papers and property of the corporation in his possession or custody to his
successor or the chief executive officer. The secretary shall have and may
exercise such other powers and duties as from time to time may be conferred upon
or assigned to him by the directors.
SECTION 3.08. TREASURER. The directors shall appoint a
treasurer who shall receive and safely keep in charge all money, bills, notes,
choses in action, securities and similar property belonging to the corporation,
and shall do with or
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disburse the same as directed by the chief executive officer or the directors;
shall keep an accurate account of the finances and business of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, stated capital and shares, together with such other accounts as may be
required and hold the same open for inspection and examination by the directors;
shall give bond in such sum with such security as the directors may require for
the faithful performance of his duties; shall, upon the expiration of his term
of office, deliver all money and other property of the corporation in his
possession or custody to his successor or the chief executive officer; and shall
have and may exercise such other powers and duties as from time to time may be
conferred upon or assigned to him by the directors.
ARTICLE FOUR
SHARES
SECTION 4.01. CERTIFICATES. Certificates evidencing ownership
of shares of the corporation shall be issued to those entitled to them. Each
certificate evidencing shares of the corporation shall bear a distinguishing
number; the signatures of the chairman of the board, the president, or a vice
president, and of the secretary, an assistant secretary, the treasurer or an
assistant treasurer (except that when any such certificate is countersigned by
an incorporated transfer agent or registrar, such signatures may be facsimile,
engraved, stamped or printed); and such recitals as may be required by law.
Certificates evidencing shares of the corporation shall be of such tenor and
design as the directors may from time to time adopt and may bear such recitals
as are permitted by law.
SECTION 4.02. TRANSFERS. Shares of the corporation shall be
transferable in the manner prescribed by law and these Regulations. Transfers of
shares shall be made on the share transfer books of the corporation only by the
person named in the certificate or by attorney lawfully constituted in writing
and upon the surrender of the certificate therefor, which shall be cancelled
when a new certificate shall be issued.
SECTION 4.03. TRANSFER AGENTS AND REGISTRARS. The directors
may appoint one or more agents to transfer or to register shares of the
corporation, or both.
SECTION 4.04. LOST, WRONGFULLY TAKEN OR DESTROYED
CERTIFICATES. Except as otherwise provided by law, where the owner of a
certificate evidencing shares of the corporation claims that such certificate
has been lost, destroyed or
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wrongfully taken, the directors must cause the corporation to issue a new
certificate in place of the original certificate if the owner:
(1) So requests before the corporation has notice that such
original certificate has been acquired by a bona fide purchaser; and
(2) Files with the corporation, unless waived by the
directors, an indemnity bond, with surety or sureties satisfactory to the
corporation, in such sums as the directors may, in their discretion, deem
reasonably sufficient as indemnity against any loss or liability that the
corporation may incur by reason of the issuance of each such new certificate;
and
(3) Satisfies any other reasonable requirements which may be
imposed by the directors, in their discretion.
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
SECTION 5.01. MANDATORY INDEMNIFICATION. The corporation shall
indemnify any officer or director of the corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, any action threatened or instituted by or in the
right of the corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit), partnership,
joint venture, trust or other enterprise, against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was unlawful. A
person claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for indemnification, to
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal matter, to have had no reasonable cause to believe his conduct was
unlawful,
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and the termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, rebut such presumption.
SECTION 5.02. COURT-APPROVED INDEMNIFICATION. Anything
contained in the Regulations or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or
director of the corporation who was a party to any completed action or suit
instituted by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, in respect of any claim, issue or matter asserted in
such action or suit as to which he shall have been adjudged to be liable for
acting with reckless disregard for the best interests of the corporation or
misconduct (other than negligence) in the performance of his duty to the
corporation unless and only to the extent that the Court of Common Pleas of
Licking County, Ohio or the court in which such action or suit was brought shall
determine upon application that, despite such adjudication of liability, and in
view of all the circumstances of the case, he is fairly and reasonably entitled
to such indemnity as such Court of Common Pleas or such other court shall deem
proper; and
(B) the corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as contemplated by this
Section 5.02.
SECTION 5.03. INDEMNIFICATION FOR EXPENSES. Anything contained
in the Regulations or elsewhere to the contrary notwithstanding, to the extent
that an officer or director of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
SECTION 5.04 DETERMINATION REQUIRED. Any indemnification
required under Section 5.01 and not precluded under Section 5.02 shall be made
by the corporation only upon a determination that such indemnification of the
officer or director is proper in the circumstances because he has met the
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applicable standard of conduct set forth in Section 5.01. Such determination may
be made only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written opinion
by independent legal counsel other than an attorney, or a firm having associated
with it an attorney, who has been retained by or who has performed services for
the corporation, or any person to be indemnified, within the past five years, or
(C) by the shareholders, or (D) by the Court of Common Pleas of Licking County,
Ohio or (if the corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be made by a
court under division (D) of this Section 5.04 at any time [including, without
limitation, any time before, during or after the time when any such
determination may be requested of, be under consideration by or have been denied
or disregarded by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the shareholders under
division (C) of this Section 5.04]; and no failure for any reason to make any
such determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by shareholders under division
(C) of this Section 5.04 shall be evidence in rebuttal of the presumption
recited in Section 5.01. Any determination made by the disinterested directors
under division (A) or by independent legal counsel under division (B) of this
Section 5.04 to make indemnification in respect of any claim, issue or matter
asserted in an action or suit threatened or brought by or in the right of the
corporation shall be promptly communicated to the person who threatened or
brought such action or suit, and within ten (l0) days after receipt of such
notification such person shall have the right to petition the Court of Common
Pleas of Licking County, Ohio or the court in which such action or suit was
brought, if any, to review the reasonableness of such determination.
SECTION 5.05. ADVANCES FOR EXPENSES. Expenses (including,
without limitation, attorneys' fees, filing fees, court reporters' fees and
transcript costs) incurred in defending any action, suit or proceeding referred
to in Section 5.01 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding to or on behalf of the officer or
director promptly as such expenses are incurred by him, but only if such officer
or director shall first agree, in writing, to repay all amounts so paid in
respect of any claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the merits
or otherwise:
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(A) if it shall ultimately be determined as provided in
Section 5.04 that he is not entitled to be indemnified by the corporation as
provided under Section 5.01; or
(B) if, in respect of any claim, issue or other matter
asserted by or in the right of the corporation in such action or suit, he shall
have been adjudged to be liable for acting with reckless disregard for the best
interests of the corporation or misconduct (other than negligence) in the
performance of his duty to the corporation, unless and only to the extent that
the Court of Common Pleas of Licking County, Ohio or the court in which such
action or suit was brought shall determine upon application that, despite such
adjudication of liability, and in view of all the circumstances, he is fairly
and reasonably entitled to all or part of such indemnification.
SECTION 5.06. ARTICLE FIVE NOT EXCLUSIVE. The indemnification
provided by this Article FIVE shall not be exclusive of, and shall be in
addition to, any other rights to which any person seeking indemnification may be
entitled under the Articles or the Regulations or any agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be an officer or
director of the corporation and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
SECTION 5.07. INSURANCE. The corporation may purchase and
maintain insurance or furnish similar protection, including but not limited to
trust funds, letters of credit, or self-insurance, on behalf of any person who
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, trustee, officer,
employee, or agent of another corporation (domestic or foreign, nonprofit or for
profit), partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have the
obligation or the power to indemnify him against such liability under the
provisions of this Article FIVE. Insurance may be purchased from or maintained
with a person in which the corporation has a financial interest.
SECTION 5.08. CERTAIN DEFINITIONS. For purposes of this
Article FIVE, and as examples and not by way of limitation:
(A) A person claiming indemnification under this Article FIVE
shall be deemed to have been successful on the
15
<PAGE> 19
merits or otherwise in defense of any action, suit or proceeding referred to in
Section 5.01, or in defense of any claim, issue or other matter therein, if such
action, suit or proceeding shall be terminated as to such person, with or
without prejudice, without the entry of a judgment or order against him, without
a conviction of him, without the imposition of a fine upon him and without his
payment or agreement to pay any amount in settlement thereof (whether or not any
such termination is based upon a judicial or other determination of the lack of
merit of the claims made against him or otherwise results in a vindication of
him); and
(B) References to an "other enterprise" shall include employee
benefit plans; references to a "fine" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" within the meaning of that term as used in this Article FIVE.
SECTION 5.09. VENUE. Any action, suit or proceeding to
determine a claim for indemnification under this Article FIVE may be maintained
by the person claiming such indemnification, or by the corporation, in the Court
of Common Pleas of Licking County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Licking County, Ohio in any
such action, suit or proceeding.
ARTICLE SIX
MISCELLANEOUS
SECTION 6.01. AMENDMENTS. The Regulations may be amended, or
new regulations may be adopted, at a meeting of shareholders held for such
purpose, only by the affirmative vote of the holders of shares entitling them to
exercise not less than two-thirds of the voting power of the corporation on such
proposal, or without a meeting by the written consent of the holders of shares
entitling them to exercise not less than two-thirds of the voting power of the
corporation on such proposal.
16
<PAGE> 20
SECTION 6.02. ACTION BY SHAREHOLDERS OR DIRECTORS WITHOUT A
MEETING. Anything contained in the Regulations to the contrary notwithstanding,
except as provided in Section 6.01, any action which may be authorized or taken
at a meeting of the shareholders or of the directors or of a committee of the
directors, as the case may be, may be authorized or taken without a meeting with
the affirmative vote or approval of, and in a writing or writings signed by, all
the shareholders who would be entitled to notice of a meeting of the
shareholders held for such purpose, or all the directors, or all the members of
such committee of the directors, respectively, which writings shall be filed
with or entered upon the records of the corporation.
SECTION 6.03. SECTION 1701.831 OF THE OHIO REVISED CODE NOT APPLICABLE.
Section 1701.831 of the Ohio Revised Code does not apply to control share
acquisitions of shares of the corporation.
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